fourtheenth annual international maritime law

FOURTHEENTH ANNUAL INTERNATIONAL MARITIME LAW

ARBITRATION MOOT COMPETITION

2013

UNIVERSITAS GADJAH MADA

18

IN THE MATTER OF AN ARBITRATION HELD AT LONDON

MEMORANDUM FOR THE RESPONDENT

On behalf of:

Twilight Carriers Inc.

RESPONDENT

Against:

Aadvark Ltd.

Aadvark House

The High Street, Bootle,

Merseyside

CLAIMANT

TEAM

DZULYAN WISHARDY ALWI • KENNY CETERA • RUDI YUDHO SARTONO

SHITA PINA SAPHIRA • VULKANIA NEYSA ALMANDINE

INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013

MEMORANDUM FOR THE RESPONDENT

TEAM NUMBER 18

TEAM 18 MEMORANDUM FOR THE RESPONDENT | i

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TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013

TABLE OF CONTENTS

TABLE OF CONTENTS ............................................................................................. i

LIST OF ABBREVIATIONS ................................................................................... iii

TABLE OF AUTHORITIES ...................................................................................... v

SUMMARY OF FACTS.............................................................................................. 1

QUESTIONS PRESENTED ....................................................................................... 2

ARGUMENTS PRESENTED..................................................................................... 3

I. THE CLAIMANT HAS NO LEGAL STANDING TO SUBMIT CLAIMS

AGAINST THE RESPONDENT ...................................................................... 3

A. The Claimant is barred under the principle of privity of contract from

submitting claims against the Respondent ................................................................. 3

i. The Claimant was not a party to the Charterparty ..................................... 3

ii. The issued B/L is insufficient to establish the Claimant’s right to sue ....... 3

B. The Claimant’s submission lies beyond the Respondent’s responsibility of

duty of care ......................................................................................................................... 4

C. Alternatively, even if the Claimant has title to sue, the Arbitration Clause

does not govern the matters submitted in this proceeding .................................... 5

i. The narrow wording of the Arbitration Clause does not cover claims

under the B/L ............................................................................................... 5

ii. The London Tribunal does not have jurisdiction over claims of tort.......... 6

II. THE RESPONDENT DID NOT BREACH ITS CONTRACTUAL

OBLIGATION BY DISCHARGING THE CARGO AT ROTTERDAM .... 6

A. The delivery is justified based on the Liberty Clause ............................................ 7

i. The port of discharge was substituted to Rotterdam with Beatles’

approval ...................................................................................................... 7

ii. The Respondent is entitled to discharge at Rotterdam to safeguard the

cargo ........................................................................................................... 7

B. The Respondent is not obliged to consider the Claimant’s order to discharge

at Liverpool ........................................................................................................................ 8

i. Respondent was only bound to follow Beatles’ orders ............................... 8

ii. The Claimant did not convincingly prove that it was the lawful holder of

the B/L ......................................................................................................... 8

C. The Respondent’s obligation has been exhausted by the discharging of the

cargo at Rotterdam ........................................................................................................... 9

D. Even if the Tribunal rules that the act of the Respondent was unlawful, the

Respondent’s actions were justified by virtue of the LOI.................................. 10

III. THE RESPONDENT HAS NOT BREACHED ITS OBLIGATION TO

EXERCISE CARE FOR THE CARGO ........................................................ 11

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A. The Claimant cannot fulfill its burden of proof in establishing a breach of

obligation to care for the cargo .................................................................................. 11

B. Alternatively, the Respondent is immune under Article IV Rule 2 of the

Hague-Visby Rules ....................................................................................................... 12

i. The cause of loss was an act exempted under Article IV Rule 2 of the

Hague-Visby Rules .................................................................................... 13

ii. The Respondent had taken proper precautions to avoid piracy ............... 14

C. The Respondent has not breached its obligation to heat the cargo .................. 15

i. The heating of the cargo complied to the Respondent’s obligation to

properly care for the cargo ....................................................................... 15

ii. Alternatively, Respondent is not liable for failure in heating the cargo ... 16

IV. THE RESPONDENT REJECTS THE CHARACTERISATION OF

DAMAGES ASSERTED BY THE CLAIMANT .......................................... 17

A. The Claimant’s damages are too remote to be attributed to the Respondent 17

i. The damages incurred were not within the Respondent’s contemplation at

the making of the Charterparty ................................................................. 17

ii. The Respondent has not assumed liability over the losses incurred by the

Claimant .................................................................................................... 18

B. No causal connection exists between the Respondent’s actions and the

Claimant’s losses ........................................................................................................... 19

i. The Respondent’s alleged breach was not an effective cause of the

Claimant’s loss .......................................................................................... 19

ii. The Claimant has broken the chain of causation to the damage .............. 20

C. The Claimant had erred in applying the proper measure of damages ............ 20

D. Alternatively, the Respondent’s liability for the damages is limited as the

Claimant has failed its duty to mitigate its losses ................................................. 21

E. The Dutch proceeding expenses are not recoverable by being unreasonably

incurred ............................................................................................................................. 22

PRAYER FOR RELIEF............................................................................................ 23

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LIST OF ABBREVIATIONS

¶ Paragraph

B/L The bills of lading dated 25 October 2008

covering the shipment the subject of these

proceedings

Beatles Oils & Fats Ltd. Beatles Oils & Fats Ltd./ Charterer of the

Twilight Trader/Sellers of PFAD for Claimant

BMP Best Management Practices for Protection

against Somalia Based Piracy

CAD Cash Against Document

CIF Cost, Insurance and Freight

Claimant Aadvark Ltd.

FOSFA Federation of Oils, Seeds and Fats Associations

GMQ Good Merchantable Quality

LOI Letter of Indemnity

PFAD Palm Fatty Acid Distillate

pp. Pages

Respondent Twilight Carriers Inc.

The Charterparty The charter party concluded between Beatles

Oils & Fats Ltd. and Twilight Carriers Inc.

The Dutch proceedings The District Court of Rotterdam prjloceeding

commencing on 15 July 2009 and its appeal to

the Court of Appeal on 21 August 2009

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The Hague-Visby Rules Protocol to Amend the International Convention

for the Unification of Certain Rules of Law

Relating to Bills of Lading (Brussels 1968)

The Tribunal The current London arbitration proceedings to

hear the dispute between Aadvark Ltd. and

Twilight Carriers

Vessel The Twilight Trader

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TABLE OF AUTHORITIES

CASES

Adams Express Co v Croninger, 226 U.S. 491, 33 S. Ct. 148, 57 L. Ed. 314 [1913] ... 3

Aitken v Ernsthausen [1894] 1 QB 773 ....................................................................... 25

Akt Danske-Sukkerfabrikker v Bajamar Compania Naviera [1983] 2 Lloyd’s Rep. 210

.................................................................................................................................. 14

ASM Shipping Ltd of India v TTMI Ltd of England [2009] 1 Lloyd’s Rep. 293 ......... 21

Borealis AB v Stargas Ltd (The Berge Sisar) [2001] UKHL 17.................................... 7

British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric

Railways Co of London Ltd [1912] AC 673, 689 (HL) ........................................... 25

Brown Jenkinson & Co Ltd v Percy Dalton (London) Ltd [1957] 2 QB 621 .............. 11

C Czarnikow Ltd v Koufus (The Heron II) [1969] 1 AC 350 .......................... 20, 21, 22

C&P Haulage Co Ltd v Middleton [1983] 1 WLR 1461 ............................................. 23

Caparo Industries Plc v Dickman [1990] 2 AC 605...................................................... 5

Cator v Great Western Insurance Co of New York [1873] LR 8 CP 552 .................... 13

Ceval Alimentos v Agrimpex Trading (The Nothern Progress) (No.2) [1996] 2 Lloyd’s

Rep. 319 ..................................................................................................................... 5

Charles Goodfellow Lumber Sales v Verreault, Hovington and Verreault Navigation

Inc [1971] 1 Lloyd’s Rep. 185 ................................................................................. 15

Compania Naviera Maropan v Bowaters [1955] 2 QB 68 .......................................... 23

Connolly Shaw v Nordenfjeldske SS Co [1934] 50 TLR 418 ........................................ 8

Cosco Bulk Carrier Co Ltd v TeamUp Owning Co Ltd (The Saldanha) [2010] EWHC

1340 (Comm) (QB) .................................................................................................. 20

Cumming v Brown (1808) 9 East 506 ............................................................................ 9

Darbishire v Warran [1963] 1 WLR 1067 (CA) ......................................................... 25

Daval Aciers D'Usinor et De Sacilor and Others v Armare SRL (The Nerano) [1996]

1 Lloyd's Rep. 1 ......................................................................................................... 4

Donoghue v Stevenson [1932] UKHL 100 .................................................................. 19

East West Corporation v DKBS 1912 and AKTS Svendborg Utaniko Ltd v P&O

Nedlloyd BV (No.2) [2002] EHWC 253 (Comm) .................................................. 7, 9

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Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168 .................. 5

Empresa Cubana Importada de Alimentos “Alimport” v Iasmos Shipping Co SA (The

Good Friend) [1984] 2 Lloyd’s Rep. 586 ................................................................ 25

Farenco Shipping Co Ltd v Daebo Shipping Co Ltd (The Bremen Max) [2008] EWHC

2755 (Comm) ........................................................................................................... 11

Federal Bulk Carriers v C Itoh (The Federal Bulker) [1989] 1 Lloyd’s Rep. 103 ....... 4

Finlay v The Liverpool and Great Western Steamship Company Limited [1870] 23 LT

251............................................................................................................................ 10

Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360 ........................................ 23

Gosse Millerd v Canadian Government Merchant Marine [1929] AC 223 ................ 14

Great Eastern Shipping Co Ltd v Far East Chartering Ltd and Another (The Jag Rav)

[2012] EWCA Civ 180 ............................................................................................ 12

Hamilton & C. v Mackie & Sons [1889] 5 TLR 677 ..................................................... 6

Hammond v Bussey [1888] 20 QBD 79 CA ................................................................ 26

Hansen-Tangens Rederi III A/S v Total Transport Corp (The Sagona) [1984] 1

Lloyd’s Rep. 194 ........................................................................................................ 9

Hedley v Pinkney and Sons Steamship Company [1892] 1 QB 58 .............................. 19

Heinrich Hanno & Co v Fairlight Shipping Co (The Kostas K) [1985] 1 Lloyd’s Rep.

231.............................................................................................................................. 8

Hellenic Dolphin [1978] 2 Lloyd’s Rep. 336 .............................................................. 13

Kuo International Oil Ltd and Others v Daisy Shipping Co Ltd and another (The

Yamatogawa) [1990] 2 Lloyd's Rep. 39.

...................................................................................................................................... 16

L Brown & Sons Ltd v Crosby Homes [2005] EWHC 3503 .......................................... 6

Leesh River Tea Co v British India Steam Navigation Co (The Chyebasa) [1966] 2

Lloyd’s Rep. 19 ........................................................................................................ 17

Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] 2 A1l ER

145.............................................................................................................................. 5

Lewis Emanuel & Son Ltd and another v Hepburn [1960] 1 Lloyd’s Rep. 308.......... 14

Macrae v HG Swindells [1954] 1 WLR 597 ................................................................ 25

Mahme Trust Reg v Lloyds TSB Bank plc [2006] EWHC 1321 (Ch) .......................... 27

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Marbig Rexel Pty Ltd and another v ABC Container Line NV The TNT Express [1992]

2 Lloyd’s Rep. 636 ................................................................................................... 13

McFadden v Blue Star Line [1904] 1 KB 697 ............................................................. 16

Mehmet Dogan Bey v GG Abdeni & Co Ltd [1951] 1 Lloyd’s Rep. 433 .................... 22

Meyerstein v Barber [1870] LR 4 HL 317 ................................................................... 11

Miramar Maritime Corp v Holborn Oil (The Miramar) [1984] 1 Lloyd’s Rep. 142 .... 4

Monarch Steamship Co Ltd v Karlshamns Oljefabriker A/B [1949] AC 196 ............. 23

Montgomery v Hutchins [1905] 94 LT 207 ................................................................... 9

Moschi v Lep Air Services [1972] 2 All ER 393 ............................................................ 5

Motis Export v Dampskibsellskabet AF 1912 [2000] 1 Lloyd’s Rep. 121 .................. 11

Mulvenna v Royal Bank of Scotland plc [2003] EWCA Civ 1112 .............................. 23

Notara v Henderson [1872] LR 7 QB 225..................................................................... 8

Owners of the Annefield v Owners of Cargo Lately Laden on Board the Annefield

(The Annefield) [1971] 1 Lloyd’s Rep. 1 CA ............................................................ 4

Papera Traders v Hyundai Merchant Marine (The Eurasian Dream) [2002] 1 Lloyd’s

Rep. 719 ................................................................................................................... 16

Petroships Pte Ltd v Petec Trading and Investment Corporation and Others [2001]

1Lloyd’s Rep. 348 .................................................................................................... 15

Pickering v Barclay [1648] Styles 132 ........................................................................ 15

Pow v Davis [1861] 1 B. & S. 220 ............................................................................... 27

Pyrene v Scindia Navigation Co. [1954] 2 QB 402 ..................................................... 10

Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1962] 1 QB

42................................................................................................................................ 8

Select Commodities Ltd v Valdo SA (The Florida) [2006] EWHC 1137 (Comm) ...... 24

Serena Navigation Ltd v Dera Commercial Establishment (The Limnos) [2008] 2

Lloyd's Rep. 166 ...................................................................................................... 14

Shipping Corp of India Ltd v Gamlen Chemical Co (Australasia) Pty Ltd [1980] 147

CLR 142 ................................................................................................................... 12

Short v Kalloway [1839] 11 A&E 29 ........................................................................... 26

Skip A/S Nordheim v Syrian Petroleum (The Varenna) [1984] 1 QB 599..................... 4

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Sotiros Shipping Inc v Sameiet Solholt [1983] 1 Lloyd’s Rep. 605 ............................. 25

Stanton v Richardson [1874] LR 9 CP 390 ................................................................. 13

Steel Coils Inc v M/V Lake Marion [2002] AMC 1680 (ED La. 2001) ....................... 25

Steel et al v The State Line Steamship Company [1877-78] LR 3 App. Cas. 72 ......... 19

Sucre Export SA v Northern River Shipping Ltd (The Sormovskiy 3068) [1994] 2

Lloyd’s Rep. 274 ...................................................................................................... 11

TB&S Batchelor & Co Ltd v Owners of the SS Merak (The Merak) [1964] P.223 (CA)

.................................................................................................................................... 6

The Amstelslot [1963] 2 Lloyd’s Rep. 223 .................................................................. 19

The Arpad [1934] P.189 CA .......................................................................................... 9

The Fanis [1994] QB 1 Lloyd’s Rep. 633 ................................................................... 25

The Frances and Jane [1929] 34 Lloyd’s Rep. 128 .................................................... 22

The Glory Wealth Shipping v Korea Line Corporation [2011] EWHC 1819 ....... 24, 25

The Kapitan Sakharov [2000] 2 Lloyd’s Rep. 255 ...................................................... 14

The Soholt [1983] 1 Lloyd’s Rep. 605, 608 (CA)........................................................ 25

The Stone Gemini [1999] 2 Lloyd’s Rep. 255 ............................................................. 12

The Torepo [2002] 2 Lloyd’s Rep. 535 ......................................................................... 5

Trafigura Beheer BV v Mediterranean Shipping Co SA (The MSC Amsterdam) [2007]

2 Lloyd’s Rep. 622 ................................................................................................... 10

Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48 ..................... 21, 22

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 ............. 22

Vrinera Marine Co Ltd v Eastern Rich Operations Inc (The Vakis T) [2004] EWHC

1752.............................................................................................................. 21, 22, 27

Weld-Blundell v Stephens [1920] AC 956 .................................................................. 23

Whistler International v Kawasaki Kisen Kaisha (The Hill Harmony) [2001] 1 AC

638............................................................................................................................ 14

STATUTES

Protocol to Amend the International Convention for the Unification of Certain Rules

of Law Relating to Bills of Lading (The Hague-Visby Rules), Brussels, 1968 ....... 15

OTHER AUTHORITIES

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International Maritime Organization, “Reports on Acts of Piracy and Armed Robbery

against Ships: Acts Reported during October 2011”, available at

<http://www.imo.org/blast/blastDataHelper.asp?data_id=30926&filename=177.p

df> ............................................................................................................................ 14

International Maritime Security Association and Berger Risk Solutions, “Gulf of

Aden, Piracy: Background, Forecast, and Practical Prevention Strategies”,

available at <http://www.bergenrisksolutions.com/index.php?dokument=377>.... 14

Nordisk Skibsrederforening, “Nordisk Medlemsblad No. 573 November 2011”,

available at <http://www.nordisk.no/arch/_img/9089306.pdf.> ............................. 15

The Travaux Préparatoire of the Hague Rules and the Hague-Visby Rules ................ 13

BOOKS

Chee Yeoh Beng, et al., “Quality of Palm Fatty Acid Distillate upon Storage: Effect

of Mild Steel”, [2012] 24 Journal of Oil Palm Research (ELAEIS) ....................... 16

Clive R. Symmons, Selected Contemporary Issues in the Law of the Sea (Martinus

Nijhoff Publishers, 2011) ......................................................................................... 15

Cooke, et al., Voyage Charters (Informa, 3rd

Edition, 2007) ........................................ 4

Davies M. and Dickey A., Shipping Law (Lawbook Co, 3rd

Edition, 2004) ............... 11

Donoghue v Stevenson [1932] AC 562. See also G.H. Treitel, The Law of Contract

(Sweet & Maxwell, 9th

Edition, 1987) ....................................................................... 3

Harvey McGregor and John Dawson Mayne, McGregor on Damages (Sweet &

Maxwell, 1997) ...................................................................................... 20, 21, 22, 23

J. Ashley Roach and Robert W. Smith, Excessive Maritime Claims, (Martinus Nijhoff

Publishers, 3rd

Edition, 2012)................................................................................... 15

J. Judah Philip Benjamin, Benjamin’s Sales of Goods (Sweet & Maxwell, 7th

Edition,

2006) .......................................................................................................................... 8

Jill Poole, Textbook on Contract Law (Oxford University Press, 2012) ..................... 18

Joseph Chitty and H. G. Beale, Chitty on Contracts: Volume I (Sweet & Maxwell,

2000) .................................................................................................................. 18, 22

Julian DM Lew, et al., Comparative International Commercial Arbitration (Kluwer

Law International, 2003) ........................................................................................... 5

Lord Justice Aikens, et al., 2006, Bills of Ladings, 1st Edition. Chapter 9, “Claims

Other than Contract”, available at <http://www.i-

law.com/ilaw/doc/view.htm?id=131046>. ................................................................ 6

Michael D. Tusiani, The Petroleum Shipping Industry: Operations and Practices

(Volume 2) (PennWell Publishing, 1996) ................................................................ 15

TEAM 18 MEMORANDUM FOR THE RESPONDENT | x

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N.J. Margetson, The System of Liability of Articles III and IV of the Hague (Visby)

Rules (Uitgeverij Paris, 2008) .................................................................................. 11

Peter R. Brodie, Commercial Shipping Handbook (Informa, 5th

Edition, 2006) ......... 10

Simon Baughen, Shipping Law (4th

Edition, Routledge, 2009) ....................... 19, 21, 22

William Tetley, Marine Cargo Claims: Volume I (4th

Edition, Thomson Carswell,

2008) ...................................................................................................... 11, 14, 20, 21

ARTICLES

Andrew Tettenborn, “A. Hadley v Baxendale: Contract Doctrine or Compensation

Rule?” [2005] 11 Texas Wesleyan Law Review 505 ................................................ 17

Bernard Marguet, “La piraterie maritime”, DMF 199 ............................................... 14

C. H. Spurin, “The Law of International Trade and Carriage of Goods”, available at

<http://www.nadr.co.uk/articles/published/shipping/001CHAPTERONETRADE.pdf

> ................................................................................................................................. 3

John H. Pendleton, “Maritime Security: Actions Needed to Assess and Update Plan

and Enhance Collaboration Among Partners Involved in Countering Piracy Off the

Hord of Africa”, available at <http://www.gao.gov/new.items/d10856.pdf> .......... 15

Josip Kasum, et al., “Evaluation of Existing Piracy Protective Measures”, available at

<http://bib.irb.hr/datoteka//336735.Piracy_evaluation.pdf> .................................. 15

TEAM 18 MEMORANDUM FOR THE RESPONDENT | 1

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SUMMARY OF FACTS

THE PARTIES

Aadvark Ltd. (the “Claimant”) is the buyer of Palm Fatty Acid Distillate (PFAD) sold by Beatles

Oils & Fats Ltd. (“Beatles”). Beatles then entered into a contract of carriage with Twilight Carriers

Inc. (the “Respondent”) to send the goods requested by the Claimant.

THE SALES CONTRACT

On 23 May 2008, a sales contract was made between Beatles and the Claimant to send 4,000 mt of

PFAD. The contract was governed under CIF contract terms where it was to be sent to Merseyside,

Liverpool.

VEGOIL VOYAGE CHARTERPARTY AND THE BILLS OF LADING

On 12 September 2008, Beatles entered into a Tanker Voyage Charter Party (the “Charterparty”)

with the Respondent for the Twilight Trader (the “Vessel”). The Respondent issued four original

Bills of Lading (B/L) on 25 October 2008, which made reference to the terms of the Charterparty

and the application of the Hague-Visby Rules.

THE SHIPMENT

The Vessel carried Crude Palm Oil and PFAD for two separate buyers, one of which for the

Claimant. The Vessel set sail on 5 November 2008 after its completion of loading in Dumai, where

it proceeded to Liverpool via Gulf of Aden and the Suez Canal.

THE INCIDENT

On 14 November 2008, the Vessel started to commence anti-pirate watch as it passed the entrance

to the Gulf of Aden. The next day, Somalian pirates boarded the Vessel and held the ship and its

crews hostage. The pirates prohibited any maintenance or inspections on deck by the Vessel’s crews

during the period of captivity. The last of the pirates left the Vessel on 13 February 2009 and the

Vessel subsequently proceeded to Fujairah.


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On 25 February 2009, an analysis to verify the cargo’s quality subsequent to the period of hijacking

was undergone. The results of the analysis from the samples drawn from the cargo had shown that

the cargo’s quality was within normal limits and do not give any indication of significant

contamination or deterioration and that the cargo remains suitable for use in the human food chain.

THE DISCHARGE OF CARGO

Beatles had issued a Letter of Indemnity (“LOI”) to the Respondent on 19 March 2009, asking them

to deliver the cargo to them at Rotterdam without the production of the Bills of Lading. On or about

20-22 March 2009, the Respondents had discharged the cargo to Beatles against the LOI that

Beatles had issued.

THE DUTCH PROCEEDINGS

Beatles arrested the cargo in Rotterdam on 23 March 2009 and issued an application for an order for

sale on 23 May 2009, both of which was upheld by the District Court of Rotterdam (the “Dutch

Proceedings”). The Claimant brought an appeal on 21 August 2009 to suspend the enforcement of

the sale, but was unsuccessful. As the party at loss both the Dutch Court and Court of Appeal

ordered the Claimant to pay the cost of proceedings and lawyer’s fees.

THE CLAIM

On 6 April 2010 the Claimant submitted the dispute to London arbitration. The Respondent by its

letter dated 16 June 2010 denied all liability.

QUESTIONS PRESENTED

1) Whether this Arbitration Tribunal has the jurisdiction to hear the dispute.

2) Whether the Respondent is entitled to discharge at Rotterdam.

3) Whether the Respondent breached its duty in caring the cargo.

4) Whether the Respondent is liable for the entirety of the Claimant’s damages.


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ARGUMENTS PRESENTED

I. THE CLAIMANT HAS NO LEGAL STANDING TO SUBMIT CLAIMS AGAINST

THE RESPONDENT

A. The Claimant is barred under the principle of privity of contract from submitting

claims against the Respondent

i. The Claimant was not a party to the Charterparty

1. The Claimant is not entitled to claim damages from the Respondent as it is not privy to the

Charterparty. Under the doctrine of privity of contract, “a contract cannot confer rights or

impose obligations arising under it to any person except the parties stated on its terms.”1

2. A charter party, by nature, only creates legal relation between the charterer and the carrier of

the Vessel.2 The Charterparty governing the Respondent’s carriage of goods is merely

concluded between Beatles and the Respondent. 3

Hence, by lack of privity, the Claimant is

not entitled to sue under the Charterparty.

3. Additionally, the Claimant’s status as buyer under the CIF sales contract does not make

recourse to the Charterparty available. A CIF buyer of cargo is not privy to the contract of

carriage; it has no contractual relationship with the carrier since it is the seller who makes the

contract of carriage, not the buyer.4 Thus, the Claimant has no legally enforceable rights

against the Respondent in present case.

ii. The issued B/L is insufficient to establish the Cl t’ r ght t u

4. To determine whether the B/L might create a contractual relationship between the Claimant

and the Respondent, and enforce the Arbitration Clause by way of incorporation, the

Tribunal shall assess the intention of the parties thereto as expressed from the written

1 Donoghue v Stevenson [1932] AC 562. See also G.H. Treitel, The Law of Contract (Sweet & Maxwell, 9

th Edition,

1987), p. 454. 2 Adams Express Co v Croninger, 226 U.S. 491, 33 S. Ct. 148, 57 L. Ed. 314 [1913]. See also Evidence Brief, p. 3.

3 Evidence Brief, pp. 5-12.

4 C. H. Spurin, “The Law of International Trade and Carriage of Goods”, available at

<http://www.nadr.co.uk/articles/published/shipping/001CHAPTERONETRADE.pdf>, p. 24.


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document. 5

A finding that a bill of lading incorporates the arbitration clause of a charter

party would only be warranted when examination finds that it matches the context of the bill

of lading.6

5. The Court in The Nerano found that to treat an arbitration clause as enforceable, the

linguistic applicability of the charter party, as found in the terms of the bill of lading, shall be

examined.7 In the present case, the Arbitration Clause inter alia reads that to commence

arbitration, “the Owner and the Charterer each [shall appoint] an arbitrator […].”8 Such

wording clearly shows that only Beatles and the Respondent can invoke the Arbitration

Clause, and restrict other parties from relying thereupon.

6. The Claimant cannot be held privy to the Arbitration Clause through the B/L as this would

require a manipulation of the former’s wording.9 This was affirmed in the case of The

Miramar, where it was held that a clause of the charter party referring explicitly to the

consignee cannot be incorporated into the bill of lading for the benefit of the charterer.10

7. Thus, the construction of the Arbitration Clause shall not be deemed as to include the

Claimant as a party entitled for the enforcement of such a clause vis-à-vis the Charteparty.11

B. The Cl t’ ub l b y the R p t’ r p b l ty f uty f c r

8. The Respondent does not owe the Claimant a duty of care under tort. In order to test whether

or not such obligation to prevent loss or harm exist between parties, the Court in Caparo v

Dickman found that there must be a degree of proximity between the parties concerned.12

5 Federal Bulk Carriers v C Itoh (The Federal Bulker) [1989] 1 Lloyd’s Rep. 103, 105; Skip A/S Nordheim v Syrian

Petroleum (The Varenna) [1984] 1 QB 599. 6 Julian Cooke, et al., Voyage Charters (Informa, 3

rd Edition, 2007), p. 437.

7 Daval Aciers D'Usinor et De Sacilor and Others v Armare SRL (The Nerano) [1996] 1 Lloyd's Rep. 1.

8 Evidence Brief, p. 11.

9 Owners of the Annefield v Owners of Cargo Lately Laden on Board the Annefield (The Annefield) [1971] 1 Lloyd’s

Rep. 1 CA p. 168, 184. 10

Miramar Maritime Corp v Holborn Oil (The Miramar) [1984] AC 676; [1984] 1 Lloyd’s Rep. 142. 11

Ceval Alimentos v Agrimpex Trading (The Nothern Progress) (No.2) [1996] 2 Lloyd’s Rep. 319; The Torepo [2002]

2 Lloyd’s Rep. 535. 12

Caparo Industries Plc v Dickman [1990] 2 AC 605.


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9. In the vein of proximity, a tort action is only possible if the property concerned belonged to

the buyer at the time when the damage occurred.13

Under a CIF contract, ownership of cargo

would only arise pursuant to the receipt of the bill of lading. Though the B/L was received by

the Claimant on 17 March 2009,

14 by this date the contract has been terminated through the

Claimant’s and Beatles’ repudiation thereof on 16 March 2009.15

The repudiation of a

contract would render its parties discharged from their future obligations. 16

Through its

repudiation, the Claimant has clearly shown an intention to abandon its rights under the sales

contract, including assuming ownership of the cargo. 17

10. Hence, as the Claimant was not sufficiently proximate to the Respondent, the latter did not

owe the former any duty of care to the goods.

C. Alternatively, even if the Claimant has title to sue, the Arbitration Clause does not

govern the matters submitted in this proceeding

i. The narrow wording of the Arbitration Clause does not cover claims under the

B/L

11. The Charterparty provides that the Tribunal only has jurisdiction over disputes “arising from

the making, performance, or termination of this Charter Party.”18

As clarified under L Brown

& Sons Ltd v Crosby Homes,19

the expression “arising from” is construed more narrowly than

“in connection with.” Only the wider wording of “out of or in connection with” would allow a

tribunal to adjudicate over agreements that are related but separated from the main agreement

contained in the arbitration agreement.20

13

Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] 2 A1l ER 145. 14

Evidence Brief, p. 29. 15

Ibid., p. 28. 16

Moschi v Lep Air Services [1972] 2 All ER 393. 17

Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168, ¶61-64. 18


L Brown & Sons Ltd v Crosby Homes [2005] EWHC 3503. 20

Julian DM Lew, et al., Comparative International Commercial Arbitration (Kluwer Law International, 2003), p.

168-169.


14


12. The mere incorporation of a charter party in the bill of lading does not have the effect of

including an arbitration clause which refers only to disputes under the charter party.21

Hence

resolution of disputes arising under the B/L can only be invoked when the Arbitration Clause

refers to disputes under both the Charterparty and the B/L.22

13. In the present case, the provision of the Arbitration Clause merely encompasses disputes

under the main contract (i.e. the Charterparty) and not its side contracts (i.e. the B/L).23

Thus,

the Tribunal has no capacity to adjudicate the dispute between the Claimant and the

Respondent under the B/L.

ii. The London Tribunal does not have jurisdiction over claims of tort

14. The Respondent submits that the Tribunal does not have authority to adjudicate the matter of

transfer of cargo under tort, as the Arbitration Clause does not cover bailment.24

15. Bailment is a legal relationship where physical possession of a property owned by the bailor

(i.e. consignee) is transferred into the bailee (i.e. carrier) for the purpose of safekeeping the

goods during the voyage.25

16. In East West v DKBS,26

claims of improper treatment of carried goods fell into an issue of

bailment and therefore “[did] not depend on contract.” As the Claimant’s submissions pertain

to such ‘claims other than in contract’,27

and the wording of the Arbitration Clause limits

itself to only cover contractual obligations,28

enforcement of bailment cannot be invoked

under the Arbitration Clause of the Charterparty.

II. THE RESPONDENT DID NOT BREACH ITS CONTRACTUAL OBLIGATION BY

DISCHARGING THE CARGO AT ROTTERDAM

21

Hamilton & C. v Mackie & Sons [1889] 5 TLR 677. 22

TB&S Batchelor & Co Ltd v Owners of the SS Merak (The Merak) [1964] P.223 (CA). 23


Ibid. 25

Borealis AB v Stargas Ltd (The Berge Sisar) [2001] UKHL 17; [2002] 1 AC 205. 26

East West Corporation v DKBS 1912 and AKTS Svendborg Utaniko Ltd v P&O Nedlloyd BV (No.2) [2002] EHWC

253 (Comm). 27

Lord Justice Aikens, et al., 2006, Bills of Ladings, 1st Edition. Chapter 9, “Claims Other than Contract”, available

at <http://www.i-law.com/ilaw/doc/view.htm?id=131046>. 28

Evidence Brief, p. 11.


14


A. The delivery is justified based on the Liberty Clause

i. The port of discharge w ub t tut t R tt r w th B tl ’ ppr v l

17. The Liberty Clause set out in Clause 29 of the Charterparty allows “the owner to, when

practicable, have the vessel call and discharge the cargo at another or substitute port declared

and requested by the charterers.”29

The Respondent submits that the place of delivery of the

cargo was accordingly validly modified to Rotterdam, as the Liberty Clause shows that the

Respondent, with the approval of Beatles, is free to alter the port of discharge even without

the Claimant’s consent.

18. In principle, the obligation to make the nomination of a port lies on the charterer,30

and the

charterer retains its power to change this nomination through a Liberty Clause.31

Hence a

binding port nomination such as Liverpool can be superseded by request for port substitution

in accordance to the Liberty Clause.32

19. The wording of the Liberty Clause precisely shows that the Respondent is entitled to

discharge in a substitute port pursuant to the charterer’s order. Beatles, as charterer, has

ordered the Respondent to discharge the cargo at Rotterdam and has further emphasized this

request in its LOI.33

Thus, the Respondent submits that its action in discharging at Rotterdam

was justified by the formation of this clause and the authorization of the charterer.

ii. The Respondent is entitled to discharge at Rotterdam to safeguard the cargo

20. The Liberty Clause further provides that the Respondent can substitute the port of discharge

in any situation which it judges “is likely to give risk of disadvantage to the cargo, or make it

imprudent for any reason to commence or discharge the cargo at the port of discharge.”34

29


Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1962] 1 QB 42, 110. 31

Connolly Shaw v Nordenfjeldske SS Co [1934] 50 TLR 418. 32

Heinrich Hanno & Co v Fairlight Shipping Co (The Kostas K) [1985] 1 Lloyd’s Rep. 231. 33


Ibid., p. 40.


14


21. In light of potential losses, it is only prudent for the Respondent to avoid detrimental

consequences which would reduce the value of the cargo.35

By the Claimant’s own admission,

delivering the cargo to Liverpool would pose a disadvantage to the cargo as it would then be

rendered without worth.36

As the cargo would have more value in Rotterdam rather than it

would in Liverpool,37

discharging the cargo at Rotterdam is justified under the Liberty

Clause.

B. The Respondent is not obliged to consider the Cl t’ r r t ch rg t

Liverpool

i. R p t w ly b u t f ll w B tl ’ r r

22. It was reasonable for the Respondent to not have adhered to the Claimant’s orders to

discharge at Liverpool. As found in The Sagona, a carrier is only obliged to obey the orders

of the shipper under a contract of carriage.38

Given that only the seller and the carrier are

privy to the Charterparty, Beatles is the only party having exclusive authority over the

Respondent’s conduct in shipping.39

ii. The Claimant did not convincingly prove that it was the lawful holder of the B/L

23. The Claimant bears the burden to prove that it is the rightful owner of the cargo in

demanding performance.40

Failure to do this would render the Respondent to not be obliged

to comply with its requests, as even a lawful holder of a bill of lading must prove that the title

of goods has been transferred to them to exercise its rights thereunder.41

24. In ordering the Respondent to discharge the cargo at Liverpool, the Claimant did not prove

its right of ownership over the cargo to be entitled for delivery. The Claimant had merely

35

Notara v Henderson [1872] LR 7 QB 225, Court of Exchequer Chamber. 36


Ibid. 38

Hansen-Tangens Rederi III A/S v Total Transport Corp (The Sagona) [1984] 1 Lloyd’s Rep. 194. 39

J. Judah Philip Benjamin, Benjamin’s Sales of Goods (Sweet & Maxwell, 7th

Edition, 2006), p. 1503. 40

Cumming v Brown (1808) 9 East 506, 513; Montgomery v Hutchins [1905] 94 LT 207, 208 ; The Arpad [1934]

P.189 CA. 41

East West Corporation v DKBS 1912 and AKTS Svendborg Utaniko Ltd v P&O Nedlloyd BV (no.2) [2002] EHWC

253 (Comm).


14


asserted that it is the holder of the B/L, without producing to the Respondent the contract of

sale or any other proof of ownership.42

25. A claim unsupported by evidence of legal ownership of the B/L would not automatically

prove that the Claimant was the legal owners of the cargo,43

as there is always a risk that the

B/L that the Claimant claims to holds is illegitimate or fraudulently obtained.44

As seen in

Finlay v The Liverpool, falsified claims of ownership of cargo are indeed real threats which

the Respondent is obliged to guard against.45

26. In the present case, the Respondent’s need of certainty over the title of cargo is of particular

importance since the B/L merely enlists the consignees as “to order”, and there had been no

prior contact between the Claimant and the Respondent.46

Even if the Respondent was aware

of the Claimant’s standing under the PFAD, the transfer of B/L and Claimant’s ownership of

cargo was still contentious at the time of discharge.47

27. Therefore, given the uncertainty in which the Claimant had made its claim upon the cargo

prior to its discharge in Rotterdam, the Respondent’s actions in not complying with its

request are justified.

C. The R p t’ bl g t h b xh u t by the discharging of the cargo at

Rotterdam

28. The Respondent’s obligation for delivery was effectively ended with the discharging of the

cargo in Rotterdam, and it can no longer be required to redeliver the cargo elsewhere.

29. When cargo is delivered at its destination, the bill of lading is exhausted and cannot impose

42


Pyrene v Scindia Navigation Co [1954] 2 QB 402. 44

Trafigura Beheer BV v Mediterranean Shipping Co SA (The MSC Amsterdam) [2007] 2 Lloyd’s Rep. 622. 45

Finlay v The Liverpool and Great Western Steamship Company Limited [1870] 23 LT 251; Trafigura Beheer BV v

Mediterranean Shipping Co SA (The MSC Amsterdam) [2007] 2 Lloyd’s Rep. 622. 46


Ibid., p. 34.


14


further obligations to the carrier.48

Clause 2 of the B/L clearly shows that the Respondent

shall in no case be liable for the cargo after discharging.49

This cessation of responsibility is

further affirmed by the Liberty Clause, providing that the Respondent’s discharge at

Rotterdam “constitute complete delivery and performance under this contract and [the

Respondent] shall be freed from any further responsibility.”

D. Even if the Tribunal rules that the act of the Respondent was unlawful, the

R p t’ ct w r ju t f by v rtu f th LO

30. Beatles issued an LOI to indemnify the Respondent for bringing the cargo to Rotterdam.50

The enforcement of LOI is not uncommon in practice,51

specifically in justifying charterers

in discharging without a B/L.52

31. A shift of liability for loss can occur from charterer to shipper based on the construction of

the contract.53

In The Sormovskiy 3068, it is established that this condition is satisfied (and

delivery made legitimate), where there are terms requiring the master to deliver the cargo

against an LOI or bank guarantee.54

Given that Beatles has explicitly instructed the

Respondent to discharge at Rotterdam without the B/L against the LOI,55

the Respondent

could not be held liable for cost and consequences for following Beatles’ direct instructions

as the shipper.56

32. The Stone Gemini dealt with an LOI with identical wording to the present LOI; the holder is

indemnified and held “harmless in respect of any liability loss or damage” arising from

delivering the goods.57

The court held that the letter was cast in broad language and was

48

Meyerstein v Barber [1870] LR 4 HL 317. 49


Ibid., p. 53. 51

Brown Jenkinson & Co Ltd v Percy Dalton (London) Ltd [1957] 2 QB 621. 52

Farenco Shipping Co Ltd v Daebo Shipping Co Ltd (The Bremen Max) [2008] EWHC 2755 (Comm). 53

Motis Export v Dampskibsellskabet AF 1912 [2000] 1 Lloyd’s Rep. 121. 54

Sucre Export SA v Northern River Shipping Ltd (The Sormovskiy 3068) [1994] 2 Lloyd’s Rep. 274. 55


Peter R. Brodie, Commercial Shipping Handbook (Informa, 5th

Edition, 2006). 57

The Stone Gemini [1999] 2 Lloyd’s Rep. 255, 260; Evidence Brief, p. 53.


14


therefore sufficient to cover all liability including the claim of the holder of the B/L.58

Therefore, as the LOI constitutes a shift of responsibility, it renders the carrier to be not liable

for the delivery without B/L.59

III. THE RESPONDENT HAS NOT BREACHED ITS OBLIGATION TO EXERCISE

CARE FOR THE CARGO

A. The Claimant cannot fulfill its burden of proof in establishing a breach of obligation to

care for the cargo

33. The Respondent is obliged under Article III Rule 2 of the Hague-Visby Rules, which has been

incorporated to the B/L and the Charterparty by means of the General Paramount Clause,60

to

exercise reasonable care for the cargo. The Respondent submits that it had complied with its

obligation to care for the cargo as evidenced by the lack of physical damage thereof. In

alleging the existence of a breach, the Claimant has failed its burden of proof in establishing

actual damage to the cargo.61

34. As cargo owner, the Claimant must prima facie prove that the cargo, which had been shipped

in good order and condition, was physically damaged on arrival.62

As established in Stanton v

Richardson, the Claimant must cite actual damage to prove uncargoworthiness.63

In this

regard, the damage to the cargo must be physical and not merely pertain to its reputation in

the market.64

35. In the present case, the alleged damage to the cargo does not pertain to any physical loss.

There have been no physical changes in the quality of oil which would render it unfit to enter

58

Ibid. 59

Great Eastern Shipping Co Ltd v Far East Chartering Ltd and Another (the Jag Rav) [2012] EWCA Civ 180. 60

Evidence Brief, pp. 15, 17, 19, 21. General Paramount Clause incorporates the Hague-Visby Rules into the Bill of

Lading 61

Shipping Corp of India Ltd v Gamlen Chemical Co (Australasia) Pty Ltd [1980] 147 CLR 142, 168 62

Hellenic Dolphin [1978] 2 Lloyd’s Rep. 336, 339; Davies M. and Dickey A., Shipping Law (Lawbook Co, 3rd

Edition, 2004), p. 209; N.J. Margetson, The System of Liability of Articles III and IV of the Hague (Visby) Rules

(Uitgeverij Paris, 2008), pp. 87, 134. 63

Stanton v Richardson [1874] LR 9 CP 390. 64

Cator v Great Western Insurance Co of New York [1873] LR 8 CP 552; William Tetley, Marine Cargo Claims:

Volume I (Thomson Carswell, 4th

Edition, 2008), p. 1814


14


the food/feed chain. The oil had passed both FOSFA65

and Contamination Analysis test,66

where it was proven to experience insignificant changes in oil that still fall in the normal limit

for use in the food/feed chain.67

36. Instead, the only reason for a possible drop of prices of the PFAD would be the fear of

contamination and potential usability of the cargo. A mere drop of prices due to a loss of

reputation without actual damage to the cargo itself, as seen in The Limnos,68

is not

considered as a recoverable damage to the cargo.

37. Furthermore, this perception of potential damage is unwarranted, as the Claimant’s sub-

buyers, Delta and Caspian, have declared to be willing to accept the cargo without any

reduction in prices.69

Hence, as the Claimant can only be perceived to have incurred a pure

economic loss due to the hijacking by the Somali pirates, the Respondent cannot be held to

have breached its obligation on cargo care.70

B. Alternatively, the Respondent is immune under Article IV Rule 2 of the Hague-Visby

Rules

38. Even when the carrier is considered to have caused a loss or damage through a failure to

properly and carefully handle, keep and care for the cargo under Article III Rule 2, it is

absolved from liability under one or more of the exceptions under Article IV Rule 2 of the

Hague-Visby Rules.71

39. The Respondent submits that it is not liable for any deterioration in the quality of the cargo by

reason of the Vessel being hijacked by Somali pirates.72

The Respondent has fulfilled the

burden of proof in which the carrier must fulfill to be protected under Article IV Rule 2,

65


Ibid. 67

Ibid. 68

Serena Navigation Ltd v Dera Commercial Establishment (The Limnos) [2008] 2 Lloyd's Rep. 166. 69

Evidence Brief, pp. 60-61. 70

Lewis Emanuel & Son Ltd and another v Hepburn [1960] 1 Lloyd’s Rep. 308 71

Gosse Millerd v Canadian Government Merchant Marine [1929] AC 223; Whistler International v Kawasaki Kisen

Kaisha (The Hill Harmony) [2001] 1 AC 638, 658. 72

Evidence Brief, p. 73.


14


namely to prove that the cause of loss fell under the immunities and that it has exercised due

diligence in respect of the loss. 73

i. The cause of loss was an act exempted under Article IV Rule 2 of the Hague-Visby

Rules

40. On 15 November 2008, the Respondent’s Vessel was boarded by Somalian pirates, whereby

the Vessel and the Vessel crew was held hostage until 12 February 2009.74

41. Article IV Rule 2(f) provides that a carrier shall not be held responsible for loss or damage

arising from the acts of public enemies. The term “public enemies” has been affirmed by the

travaux préparatoire to the Hague-Visby Rules as to include pirates, as a common enemy of

mankind.75

Furthermore, the General Exceptions Clause within the Charterparty had explicitly

provided piracy as one of the circumstances where the carrier would be exempted from

liability.76

42. Alternatively, the Respondent is absolved from liability from the incident of piracy under

without its actual fault and privity would not be attributed to the Respondent liability. Piracy

in itself has specifically been held to be a “peril of the seas”.77

43. To rely on a defense under Article IV Rule 2(q), as seen in Charles Goodfellow Lumber Sales

v Verreault, Hovington and Verreault Navigation Inc, the particular peril must be shown to

have occurred as a result of some peril “which could not have been foreseen or guarded

against as one of the probable incidents of the voyage” before the defense of the perils of the

seas can be said to have been made out.78

73

Akt Danske-Sukkerfabrikker v Bajamar Compania Naviera [1983] 2 Lloyd’s Rep. 210, 218- 219 ; The Kapitan

Sakharov [2000] 2 Lloyd’s Rep. 255. 74


The Travaux Préparatoire of the Hague Rules and the Hague-Visby Rules, p. 408. 76 Evidence Brief, p. 41; Petroships Pte Ltd v Petec Trading and Investment Corporation and Others [2001] 1 Lloyd’s

Rep. 348 (Cresswell J). 77

Pickering v Barclay [1648] Styles 132. 78

Charles Goodfellow Lumber Sales v Verreault, Hovington and Verreault Navigation Inc [1971] 1 Lloyd’s Rep. 185,

189.


14


44. Piracy is considered unforeseen or unguarded against, as the exercise of ample protection of

vessels would still not guarantee to deter pirate attacks. In the report of the International

Maritime Organization on piracy against ships, it is shown that vessels such as the Theoforos

and the Dynatank were still damaged despite already commencing anti-pirate watch and anti-

piracy measures.79

Therefore, it is shown that the cause of Claimant’s losses fall under the

immunity of Article IV Rule 2.

ii. The Respondent had taken proper precautions to avoid piracy

45. If a carrier has been reasonably diligent in taking precautions to avoid attacks upon the

vessel, its occurrence cannot be burdened upon it.80

The Respondent is entitled to rely on the

peril of seas under Article IV Rule 2, as it has exercised due diligence to prevent the Vessel’s

hijacking.81

46. Due diligence is equivalent to the exercise of reasonable care and skill,82

which refers to the

degree of fitness of the ship to face the voyage ahead.83

It was held in The Chyebassa, that if a

complete stranger to the vessel and cargo enters a hold and steals cargo or a piece of the

vessel which later leads to damage, so long as the carrier proves that reasonable care had been

taken to prevent the unauthorized entry to the vessel, then a carrier will be able to rely on this

exception.84

47. The Respondent had taken sufficient measures to guard against piracy by instituting an anti-

pirate watch; an action which adheres to reasonable standards and practices of the industry.85

79

International Maritime Organization, “Reports on Acts of Piracy and Armed Robbery against Ships: Acts Reported

during October 2011”, available at

<http://www.imo.org/blast/blastDataHelper.asp?data_id=30926&filename=177.pdf> 80

Bernard Marguet, “La piraterie maritime”, DMF 1999, 99 at p. 104 as quoted in William Tetley, Marine Cargo

Claims: Volume I (Thomson Carswell, 4th

Edition, 2008), p. 1091. 81

Kuo International Oil Ltd and Others v Daisy Shipping Co Ltd and another (The Yamatogawa) [1990] 2 Lloyd's

Rep. 39. 82

Papera Traders v Hyundai Merchant Marine (The Eurasian Dream) [2002] 1 Lloyd’s Rep. 719. 83

McFadden v Blue Star Line [1904] 1 KB 697, 706. 84

Leesh River Tea Co v British India Steam Navigation Co (The Chyebasa) [1966] 2 Lloyd’s Rep. 193, p. 200. 85

Evidence Brief, p. 41; See also International Maritime Security Association and Berger Risk Solutions, “Gulf of

Aden, Piracy: Background, Forecast, and Practical Prevention Strategies”, available at

<http://www.bergenrisksolutions.com/index.php?dokument=377>.


14


In terms of common practice, there is nothing mandating that taking action beyond instituting

anti-piracy watch is warranted.86

This is seen in the MV Danica White proceeding, where the

Court found that the negligence in facing pirates only due to a lack of proper lookout.87

48. Although there are a set of international initiatives purporting to introduce additional

requirements in sailing through the Gulf of Aden, such as the BMP, these initiatives are not

legally binding and hence Respondent cannot be expected to adhere thereto.88

The BMP do

not have uniform practice,89

and is shown to not provide guaranteed protection against a

hijacking.90

Hence through its anti-piracy watch measures, the Respondent had exercised due

diligence in its acts to prevent the pirates from boarding.

49. Therefore, having fulfilled the conditions set out under Article IV Rule 2 of the Hague-Visby

Rules, the Respondent’s actions are protected by virtue of it.

C. The Respondent has not breached its obligation to heat the cargo

i. The heating of the cargo complied t th R p t’ bl g t t pr p rly c r

for the cargo

50. A carrier is obliged to take measures to equip itself to be able to take care of its cargo.91

The

Respondent has exercised due diligence to ensure that it was able to care for the carried

PFAD, as it was adequately prepared to maintain the quality of the cargo through heating.92

51. Pursuant to its heating obligation under Clause 16 of the Charterparty, the Respondent had

applied heating to the cargo prior to the boarding of pirates, as those were in the ordinary

86

Josip Kasum, et al., “Evaluation of Existing Piracy Protective Measures”, available at

<http://bib.irb.hr/datoteka//336735.Piracy_evaluation.pdf>, p. 2. 87

Nordisk Skibsrederforening, “Nordisk Medlemsblad No. 573 November 2011”, available at

<http://www.nordisk.no/arch/_img/9089306.pdf.> 88

J. Ashley Roach and Robert W. Smith, Excessive Maritime Claims (Martinus Nijhoff Publishers, 3rd

Edition, 2012) ,

p. 623. See also Clive R. Symmons, Selected Contemporary Issues in the Law of the Sea (Martinus Nijhoff

Publishers, 2011), p. 161. 89

John H. Pendleton, “Maritime Security: Actions Needed to Assess and Update Plan and Enhance Collaboration

Among Partners Involved in Countering Piracy Off the Hord of Africa”, available at

<http://www.gao.gov/new.items/d10856.pdf>, p. 59. 90

Ibid. 91

The Hague-Visby Rules, Article III Rule 2. 92

Michael D. Tusiani, The Petroleum Shipping Industry: Operations and Practices (Volume 2) (PennWell Publishing,

1996), p. 50.

http://www.gao.gov/new.items/d10856.pdf


14


circumstances by which he could perform such duties.93

However, care of the cargo during to

the act of piracy was unable to be performed by the Respondent, as in the period of captivity

no maintenance or inspections on deck were allowed.94

52. Even though heating after the period of captivity in Somalia was not applied by the Vessel’s

crew, such actions cannot amount to a breach of care as it did not inflict any damage to the

cargo.95

Not heating PFAD for a period less than 10 months at ambient temperature would not

amount to its deterioration.96

Thus, the Respondent has taken reasonable care and skill of the

ship and cargo throughout the voyage in the probable circumstances.

ii. Alternatively, Respondent is not liable for failure in heating the cargo

53. Alternatively, any contentions on the care of the cargo during the voyage subsequent to the

hijacking cannot be held attributable to the Respondent. The crews of the Vessel have been

instructed to heat the cargo during the voyage and in the last week prior to arrival.97

Therefore, heating obligations fell to “the skill and knowledge which [the crewmembers] had

or ought to have had.”98

54. A shipowner can only held liable when the failings of the crew are due to an inherent

incompetence by the lack of training or preparation.99

The failure to take cargo measures en

route to Fujairah is to be perceived as an independent act conducted negligently by the crews,

and not one of incompetence, as the crew was fully able to heat the cargo prior to the

hijacking of the Vessel. Therefore, the Respondent is not liable for any negligence on behalf

of its crew to heat the cargo.100

93


Ibid., p. 42. 95

Donoghue v Stevenson [1932] UKHL 100. 96

Chee Yeoh Beng, et al., “Quality of Palm Fatty Acid Distillate upon Storage: Effect of Mild Steel”, [2012] 24

Journal of Oil Palm Research (ELAEIS), pp. 1559-1561. 97


The Amstelslot [1963] 2 Lloyd’s Rep. 223, 230 (Lord Reid). 99

Hedley v Pinkney and Sons Steamship Company [1892] 1 QB 58. 100

Steel et al v The State Line Steamship Company [1877-78] LR 3 App. Cas. 72.


14


IV. THE RESPONDENT REJECTS THE CHARACTERISATION OF DAMAGES

ASSERTED BY THE CLAIMANT

A. The Claimant’ g r t r t t b ttr but t the Respondent

55. The Claimant seeks to recover the value of the PFAD and burden the expenses incurred in

purchasing its replacement for its sub-buyers.101

However, the Respondent submits that the

alleged damages are too remote to be recovered, as the damages were not within

Respondent’s contemplation at the making of the Charterparty and that the Respondent has

not assumed liability over the losses.

i. The damages incurred were not within the R p t’ c t pl t at the

making of the Charterparty

56. The losses claimed by the Claimant lay beyond the Respondent’s reasonable contemplation at

the making of contract, and hence they cannot be recovered.102

57. Firstly, a party is merely liable for damages that “may reasonably be supposed to have been in

the contemplation of both parties, at the time they made the contract, as the probable result of

the breach of it.”103

The losses incurred to compensate Claimant’s sub-buyers were not

foreseeable at the conclusion of the Charterparty on 12 September 2008, as the sub-sales

contracts were concluded on 2 December 2008 and 20 January 2009, well after the

Charterparty was made.104

58. Secondly, the Respondent cannot bear the Claimant’s damages as it arose through an

unforeseeable manner, namely through piracy. Piracy is considered as an extraneous event; an

act which does not occur on an ordinary basis. 105

As the incident which caused damages

101


C Czarnikow Ltd v Koufus (The Heron II) [1969] 1 AC 350. 103

Andrew Tettenborn, “A. Hadley v Baxendale: Contract Doctrine or Compensation Rule?”, [2005] 11 Texas

Wesleyan Law Review 505, 520. 104

Evidence Brief, pp. 22-23. 105

Cosco Bulk Carrier Co Ltd v TeamUp Owning Co Ltd (The Saldanha) [2010] EWHC 1340 (Comm) (QB).


14


arose out of “very improbable” circumstances, the damages are beyond the Respondent’s

contemplation.106

59. Thirdly, even when the Respondent could have foreseen the hijacking, it could not foresee

that such an event, ‘in the ordinary course of things,’ would cause the owners of the cargo the

type of loss for which they claimed damages.107

As claimed by the Claimant, their losses

arose due to the sensitive traceability requirement of GMQ goods. Without having been made

aware that the cargo carried was of GMQ quality, and that the Respondent could be liable for

such an extraordinary damage, the Claimant’s losses were unforeseeable.108

ii. The Respondent has not assumed liability over the losses incurred by the Claimant

60. The principle of remoteness further prescribes that not only must losses be foreseeable, the

Respondent must have explicitly assumed responsibility thereupon.109

In this vein, a party in

breach would not be liable for losses which are not within the scope of the contractual

responsibility undertaken.110

61. Judging from the present commercial background, the Respondent cannot reasonably be

regarded as having assumed the risk of the Claimant’s expenses for the satisfaction of its

contract with its sub-buyers.111

The Respondent had only undertaken to carry the goods under

the contract of carriage, but it did not make itself available for liability on the need and

expenses related to the cargo’s reselling. To the contrary, it is widely held that a carrier’s

obligation merely extends to the discharging of the cargo, and not the manner in which the

106

C Czarnikow Ltd v Koufo (The Heron II) [1969] AC 350, 389. 107

Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48. 108

Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48, ¶62; Vrinera Marine Co Ltd v Eastern Rich

Operations Inc (The Vakis T) [2004] EWHC 1752. 109

Joseph Chitty and H. G. Beale, Chitty on Contracts: Volume I (Sweet & Maxwell, 2000), ¶26-002. 110

Jill Poole, Textbook on Contract Law (Oxford University Press, 2012), p. 1955. 111

Joseph Chitty and H. G. Beale, Chitty on Contracts: Volume I (Sweet & Maxwell, 2000), ¶26-002; ASM Shipping

Ltd of India v TTMI Ltd of England [2009] 1 Lloyd’s Rep. 293.


14


cargo is employed thereafter.112

Therefore, a reasonable man in the position of the

Respondent would not have understood that they were assuming liability for the Claimant’s

potential losses.113

62. Additionally, the urgent need of reselling the cargo in carriages of goods by sea will be taken

into account only if it has been expressly communicated or incorporated into the contract.114

The Respondent cannot be expected to bear damages for arrangement with a third party about

whom it knew nothing of. 115

63. The Respondent was never made aware of Beatles’ dealings with the Claimant prior to the

submissions before the Tribunal. Therefore, as held in Victoria Laundry, the Claimant is not

entitled to recover the loss on their contracts to itself nor its sub-buyers as the Respondent

“had no knowledge of these contracts or of their terms.”116

B. No causal con ct x t b tw th R p t’ ct th Cl t’ l

i. The R p t’ ll g br ch w t ff ct v c u f the Cl t’ l

64. To recover its losses, the Claimant bears the burden to prove that the Respondent’s alleged

breach was an effective cause of the Claimant’s loss. The Respondent submits that its actions

did not cause the losses incurred by the Claimant and hence damages cannot be

recoverable.117

65. The Respondent’s alleged uncargoworthiness cannot be considered as the cause of the

damages, as a party cannot be held liable for losses where it merely provided an opportunity

to sustain damage, but not inflict it. 118

Even when the Respondent is at fault for making the

112

Simon Baughen, Shipping Law (4th

Edition, Routledge, 2009), p. 66; see also Liberty Clause in the Charterparty,

Clause 29(a). 113

C Czarnikow Ltd v Koufos (The Heron II) [1969] 1 AC 350, 382-383. 114

The Frances and Jane [1929] 34 Lloyd’s Rep. 128 ; Mehmet Dogan Bey v GG Abdeni & Co Ltd [1951] 1 Lloyd’s

Rep. 433. 115

Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48, ¶62; Vrinera Marine Co Ltd v Eastern Rich

Operations Inc (The Vakis T) [2004] EWHC 1752. 116

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528. 117

C&P Haulage Co Ltd v Middleton [1983] 1 WLR 1461. 118

Mulvenna v Royal Bank of Scotland plc [2003] EWCA Civ 1112; Galoo Ltd v Bright Grahame Murray [1994] 1

WLR 1360.


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pirate attack possible, the pirates had attacked on their own accord, and their actions are

beyond the Respondent’s control. Hence, “though [the Respondent] may have given the

occasion for [the pirates]’s mischievous activity, [the pirates] then becomes a new and

independent cause.”119

ii. The Claimant has broken the chain of causation to the damage

66. The Respondent cannot be held liable for the losses incurred through discharging in

Rotterdam, since the Claimant has cut the chain of causation as a matter of law.120

Under the

principle of causation,121

The Claimant must show that the loss was one which resulted from a

direct causal link of breach of contract by the Respondent.122

67. The Respondent submits that the taking of the cargo to Rotterdam, as recommended by

Beatles, is corroborated by the Claimant’s statement that the goods would be of no worth in

Liverpool, and that there are prospective buyers in Rotterdam.123

As the decision to head for

Rotterdam was made in in reliance to the presentation made by the Claimant to Beatles, the

Respondent cannot be held liable from losses arising thereof.124

C. The Claimant had erred in applying the proper measure of damages

68. Pursuant to Article IV Rule 5(b) of the Hague-Visby Rules, the calculation of damages shall

be made with reference to the value of such goods at the place at time at which the goods are

discharged from the ship.

69. Damages shall be calculated with reference to prices in Rotterdam instead of Liverpool

markets, as the Claimant’s compensation is limited to the value of the damaged or lost cargo

at the time and place of its delivery.125

Despite how initially the cargo was to be discharged at

119

Weld-Blundell v Stephens [1920] AC 956, 986. 120

Mulvenna v Royal Bank of Scotland plc [2003] EWCA Civ 1112. 121

Compania Naviera Maropan v Bowaters [1955] 2 QB 68. 122

Monarch Steamship Co Ltd v Karlshamns Oljefabriker A/B [1949] AC 196. 123


Harvey McGregor and John Dawson Mayne, McGregor on Damages (Sweet & Maxwell, 1997), ¶6-147. See also

Country Ltd v Girosentrale Securities [1996] 3 All ER 834 CA 857c-d. 125

William Tetley, Marine Cargo Claims: Volume I (4th

Edition, Thomson Carswell, 2008), p. 769.


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Liverpool, it has been agreed by both parties of the Charterparty for the Respondent to instead

discharge at Rotterdam. Rotterdam’s designation as the final place of delivery is made evident

through the Liberty Clause, which provides that discharge in Rotterdam shall constitute

complete delivery and the Claimant would not be bound to deliver at any other place. 126

70. Hence, the final place of discharge is Rotterdam, and the prices to measure the loss of cargo

shall be pegged on Rotterdam market rates.127

D. Alternatively, the R p t’ l b l ty f r th g l t the Claimant has

failed its duty to mitigate its losses

71. The Claimant’s right for damages is qualified by its duty to take all reasonable steps to

mitigate the loss arising from the alleged breach; failing this, the Claimant is barred from

claiming any part of the damage which is due to his neglect to take such steps.128

The

Claimant has failed to take reasonable steps to reduce its own damages by purchasing the

replacement PFAD at Liverpool,129

and the Respondent’s liability for damages is limited the

purchase price in Rotterdam plus freight rate to Liverpool.

72. A party in breach may only be held liable to the extent where expenses are necessary to cure

the breach,130

and not go beyond it. 131

To this end, the Claimant can only recover what is

reasonably needed “to expend for the purpose of making good the loss.”132

73. As shown in Steel Coils Inc v M/V Lake Marion, reasonable mitigation requires that the loss

be cured “at the best price obtainable.”133

The expenses of purchasing PFAD in Rotterdam

126

Select Commodities Ltd v Valdo SA (The Florida) [2006] EWHC 1137 (Comm). 127

The Glory Wealth Shipping v Korea Line Corporation [2011] EWHC 1819 (Comm). 128

British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd

[1912] AC 673, 689 (HL); Macrae v HG Swindells [1954] 1 WLR 597. 129

William Tetley, Marine Cargo Claims: Volume I (Thomson Carswell, 4th

Edition, 2008), p. 839; Sotiros Shipping

Inc v Sameiet Solholt [1983] 1 Lloyd’s Rep. 605, 608. See also Empresa Cubana Importada de Alimentos

“Alimport” v Iasmos Shipping Co SA (The Good Friend) [1984] 2 Lloyd’s Rep. 586, 597. 130

The Fanis [1994] QB 1 Lloyd’s Rep. 633. 131

Simon Baughen, Shipping Law (Routledge, 4th

Edition, 2009), p. 271; Aitken v Ernsthausen [1894] 1 QB 773;

Darbishire v Warran [1963] 1 WLR 1067 (CA); The Soholt [1983] 1 Lloyd’s Rep. 605, 608 (CA); Harvey

McGregor and John Dawson Mayne, McGregor on Damages (Sweet & Maxwell, 1997), pp. 189-190, ¶298. 132

Darbishire v Warran [1963] 1 WLR 1067, 1075 (Lord Justice Pearson); The Glory Wealth Shipping Pty Ltd v Korea

Line Corporation [2011] EWHC 1819 (Comm) (Justice Blair).


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and shipping it to Liverpool would only cost USD 380 pmt, while purchasing PFAD directly

in Liverpool would cost USD 522.50 pmt.134

74. By failing to take the more economical option available of purchasing the goods in

Rotterdam, the Claimant has failed in minimizing the damage incurred due to the alleged non-

delivery of the cargo.135

As the expenses of purchasing replacement PFAD in Liverpool

cannot be attributed to the Respondent’s breach, but to its unreasonable reaction to it, the

Respondent is not to be held liable thereof.136

E. The Dutch proceeding expenses are not recoverable by being unreasonably incurred

75. The Respondent denies the Claimant’s submission that the latter’s court expenses and

attorney fees in the Dutch proceedings are recoverable.

76. Firstly, court expenses from proceedings prior to the present are deemed to be unrecoverable

should they be unreasonable.137

The Claimant’s actions in the Dutch proceedings were

unreasonable as they should not have been brought, having lacked an arguable defense or

valid claim.138

77. When a party at loss brings forth an action of “unrighteous resistance to an action which [it]

cannot defend,” it is then barred from claiming the expenses of such a proceeding.139

Under

Hammond v Bussey, it is declared that a claim is made unreasonably when the parties

submitting it have done so without consulting their contractual party to confirm the existence

of a valid claim.140

In the present case, the Dutch proceedings was brought forth through the

Claimant’s assertion that the wrongs done to it warranted repudiation of the sales contract,

without first consulting whether its sub-buyers would accept the pirated PFAD. Had the

133

Steel Coils Inc v M/V Lake Marion [2002] AMC 1680, p. 1700 (ED La. 2001). 134


Joseph Chitty and H. G. Beale, Chitty on Contracts: Volume I (Sweet & Maxwell, 2000), p. 1666, ¶16-101. 136

Simon Baughen, Shipping Law (Routledge, 4th Edition, 2009), p. 266.

137 Harvey McGregor and John Dawson Mayne, McGregor on Damages (Sweet & Maxwell, 1997), p. 740

138 Ibid., ¶17-063

139 Short v Kalloway [1839] 11 A&E 29.

140 Hammond v Bussey [1888] 20 QBD 79 CA, 90.


14


Claimant consulted its sub-buyers and discovered that the cargo was acceptable, the Dutch

proceedings would not have been necessitated.

78. Secondly, the Claimant cannot claim the expenses of the Dutch proceedings as they are

considered as being too remote.141

Expenses from ligation with third parties can only be

recovered when they arise from a certain fault of the defendant.142

The Respondent’s actions

had no bearings on the raising of the Dutch proceedings, as the contentions there merely

pertained to the determination of ownership of the cargo; an issue which arose due to

allegation of non-compliance with Beatles’ insurance. Even when the Respondent had not

committed the alleged tort or breach of contract against the Claimant, the Dutch proceedings

would have nonetheless still been raised.143

79. Thus, the Claimant is barred from claiming the Dutch proceedings fees as its basis for the

proceedings were unreasonable and the Respondent’s alleged breach was not the effective

cause for the raising of the Dutch proceedings.144

PRAYER FOR RELIEF

In light of the above submissions, the Respondent requests this Arbitral Tribunal to:

DECLARE that it does not have jurisdiction to hear all disputes arising out from the Charterparty.

REJECT the Claimant’s claim that the Respondent had breached its duties under the Charterparty

ADJUDGE that the Claimant –

a) Were not entitled to delivery of the cargo;

b) Are not entitled to the costs of the Dutch proceedings;

141

Harvey McGregor and John Dawson Mayne, McGregor on Damages (Sweet & Maxwell, 1997), p. 729, ¶17-035. 142

Mahme Trust Reg v Lloyds TSB Bank plc [2006] EWHC 1321 (Ch), 68. 143

Pow v Davis [1861] 1 B. & S. 220; Harvey McGregor and John Dawson Mayne, McGregor on Damages (Sweet &

Maxwell, 1997), p. 745 at ¶17-042. 144

Vrinera Marine Co Ltd v Eastern Rich Operations Inc (The Vakis T) [2004] EWHC 1752.


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And,

ADJUGDE that the Respondent –

a) Was entitled to discharge the cargo at Rotterdam instead of Liverpool;

b) Was not liable for any deterioration in the quality of cargo by reason of the Vessel being

hijacked by Somali pirates;

c) Is entitled to limit its liability in the amount of USD 350 per mt in the total of USD 1.4

million for the replacement of the cargo under Liverpool prices; and if paragraph c) is

denied

d) Is entitled to limit its liability in the amount of USD 380 per mt in the total of USD 1.52

million for the replacement of the cargo under Rotterdam prices plus the freight rate to

Liverpool.

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